Cooling crude prices help rupee close above 71 level for first time since August 31

The rupee rose to over two-month high today after crude oil price slid further as US inventories  rose to their highest level since December 2017. The currency closed 79 paise higher to 70.67 level today compared to its previous close of 71.46 level to the US dollar on Tuesday. Forex and debt markets were closed on Wednesday on account of Id-E-Milad. The rupee has gained for the seventh straight session on increased selling of the greenback by exporters amid softening crude oil prices, and persistent foreign fund inflows.

The currency has risen 222 paise during the last seven sessions. The rupee opened at 71.10 level in trade today and hit an intra day low of 71.19 level.

Mustafa Nadeem, CEO at Epic Research said, "Rupee has appreciated in last couple of days and there are multiple factors that are aiding this appreciation. We have been bearish on USDINR (Bullish on Rupee) from 74.5 levels. Firstly, the rise in crude oil prices in the last few months was one of the most important factors along with others, India is one of the largest consumers. This was directly having an impact on CAD which was expected to be widened. Since last 2 weeks, crude has fallen 30%. Rising bond markets yield was another factor while Indian 10 year T-Bond is now down to levels of 7.74. All of this adds to a better equation for India as an economy and rupee as a currency. For very short term, we believe prices can remain negative with some minor pullbacks and in the medium term, we expect 69 to be the target."

Meanwhile, brent crude prices fell 1.13% to $62.76 per barrel compared to its previous close of $63.48 per barrel.

During the trading session, they fell further to $62.27 per barrel.

US commercial crude oil inventories rose by 4.9 million barrels to 446.91 million barrels last week, the Energy Information Administration (EIA) said in a weekly report on Wednesday. That was the highest level since December last year.

US crude oil production remained at a record 11.7 million barrels per day (bpd), the EIA said. The 10-year benchmark yield also fell to 7.74% today compared to Tuesday's close of 7.79%.

Oil prices are expected to fall further after US President Donald Trump praised Saudi Arabia over recent oil prices and called for prices to go even lower.

Brent crude has fallen nearly 28.41% from its four-year high of $86.74 early in October when the markets braced for US sanctions on Iran.

The sanctions which came into effect on November 5 and targeted Iran's oil and gas sector aimed at a complete halt to export of oil to nations such as India and China which received nearly half of Iran's crude oil and condensate exports in the first half of 2018.

Foreign investors have turned net buyers in Indian securities this month leading to a rise in demand of rupee. FIIs infused Rs 10,523 crore into the Indian market in November compared to a net withdrawal of Rs 38,906 crore in October.  That resulted in more investors seeking to convert their dollars into rupee leading to a rise in demand for the home currency hence adding more to its worth.

On October 31, 2018, the currency stood at 73.95 level to the dollar. Since then, the rupee has risen 3.97% taking into account today's intra day high of 71.01 level.